Thursday, May 31, 2007

Merchant Account Provider Fees : Let's Talk Pricing

Buying a credit card payment solution for your merchant account is like getting hitched. The first tip is to look out for a partner that you can rely on for the long haul. That simply means adopting a merchant account provider that will not give you hassles throughout the lifespan of your business. If you look closely, it's not just the choosing that takes time and effort. The process of merchant account application itself can also be a grueling ordeal! My article "Insider Tricks to Successful High Risk Merchant Account Application" will help enlighten you more about it.


In addition, it's important for merchants to get a clear picture of the the fees (and I mean all fees that are covered but not disclosed directly by the merchant account provider) and the schedule of fund transfer on your account. Once these issues are cleared up, the applying merchant must calculate the total cost, study the contract, and find out the grounds of termination of the said contract.

Now, don't be discouraged when you find out the cost of a low risk or high risk merchant account that you are applying for. There are tons of advantages to having one. You just have to know your way around it so you don't face fiascoes like non-refundable fees or misinformation resulting in your application being declined.


So what exactly are the types of fees involved in a credit card processing payment solution for a merchant account? Obviously, if you are a brick and click retailer you will pay for startup costs involving a credit card terminal, which is cheaper compared to the fees that a MOTO or Internet merchant will pay. A lot of merchants within this business category will have to question themselves and decide whether to buy a terminal/software or lease it. Buying means you will adopt the system and use it as long as your business exists (unless you intend to switch). Leasing means you will use the system for a certain period of time, and pay for a lower cost. I'll make it a point, however, that leasing isn't exactly going to cost cheaper in the long run. Not only will you have to pay for as long as the contract is still valid even if your business goes bankrupt, you will also face x cost on taxes and be granted a high or low rate depending on your credit rating.


By the time you, as a merchant applicant, have finished going through the round of paying for startup costs, it's time to face payment of the processing fees. Whatever the discount fee your chosen merchant account provider will charge you will always depend on the following:

  • type of transaction (card present/card absent)

  • assessed company risk

  • average sales ticket

  • sum charge volume

Another is the monthly minimum fee, which you can have lowered depending on your monthly volume. Merchant account providers will charge you a monthly minimum fee if you do not meet the required amount that your monthly volume has to reach. For example, if the monthly minimum fee is $50 and your monthly volume is $30, you will need to pay for the $20 to meet the minimum fee.

There are fees involved with cancellation of merchant account as well as fees written in fine print. As I've mentioned earlier, it is wise to go through the whole contract and find out all hidden costs before embracing a merchant account provider's services. Other fees include programming fees (and other extra setup fees), shipping fees, charges for technical support, and annual fees.

1 comment:

Alison said...

So, what happens when you sign a contract only to discover your rates have doubled after 6 months?